Article Number 2 in the Mutual fund series (For the previous article click here)

In the previous article I had given a brief introduction to mutual funds. As a brief recap we had seen that mutual funds basically pool money from many investors and invest that money in shares, bonds, money market instruments, commodities like gold, among other things. In this article lets continue from there and see the various benefits that mutual funds have to offer. I will list the various benefits as points so that it would be easy for you to follow.

1) Professional Management

First and foremost, as I said in the previous article, mutual funds are managed by a professional money manager so you can basically find some comfort in knowing that whoever is managing your money is a professional and knows what he is doing. The manager does research with due diligence and only then makes a decision whether it be to buy/sell shares in a company or to invest in corporate bonds of a company or be it to invest in government bonds or to just sit tight in cash.

2) Diversification (Depends of the type of Mutual Fund)

Typically mutual funds don’t invest all their money into one stock or bond. They rather diversify by buying shares, bonds etc of various fundamentally strong companies. As a rule of thumb, More »